Report

The Role of Pilots and Demonstrations in Reinventing the Utility Business Model

The rapid growth of distributed energy resources (DERs) and large-scale renewable energy is driving utilities to develop and test a wide range of new technologies, business models, and customer programs.

Figure 1: Pilots and Demos Focus on Different Topic Areas

This report explores challenges to effective innovation at U.S. electric utilities, with a focus on pilot and demonstration projects. We offer recommendations for utilities, regulators, and DER technology providers to support more effective and meaningful electricity innovation.

Figure 2: Pathways to innovation can improve across five themes

Why This Matters

As energy efficiency and self-generation erode customer electricity demand, utilities must determine how to fund needed investment in the grid with declining sales volumes. The proliferation of third-party energy devices on the grid creates new uncertainty for utilities in grid operation, as they move away from a traditional model in which the utility controlled all grid assets. In this era, utilities must develop new capabilities to integrate these new devices and manage two-way flows of energy on local distribution grids. Making the transition to a DER-rich future requires piloting new approaches to operating the electricity system, to engaging customers, to working with third-party DER providers, and to the utility business model itself.